(Adds comments from CEO to second graph.)
DOW JONES NEWSWIRES
Hewlett-Packard Co.'s (HPQ) fiscal fourth-quarter profit grew 14% amid a solid performance at the services segment, which helped boost overall operating margins.
While the economic environment remains "challenging," there are "encouraging signs of recovery in certain markets," Chief Executive Mark Hurd said during a conference call with financial analysts. "The economy is clearly more stable."
He added, during the same call, that the company's printer division appears poised for a recovery, while personal-computer sales are benefiting from "good consumer acceptance" of Microsoft Corp.'s (MSFT) new Windows 7 software.
During the quarter, the company saw a "nice" recovery in the U.S., driven mainly by consumers, "although commercial was better," said H-P Chief Financial Officer Cathie Lesjak. There was "very strong growth" in China, she said, but the company is taking a more prudent approach to Europe, the Middle East and Africa. In that region, it is "still basically a wait-and-see mode," she said. "That obviously reflects as a headwind."
She added that technology commodity prices in general were moving up most of the quarter, and she expects in the current quarter they "will continue to move up a bit."
"It's not a real big surprise; when demand kicks up, it will get tight again," she said.
Earlier this month, the high-tech giant agreed to acquire networking-equipment maker 3Com Corp. (COMS) to boost its offerings of servers, storage and networking services. The deal also escalates a growing rivalry with Cisco Systems Inc. (CSCO), as H-P will get a better foothold in China, while picking up a networking operation that targets Cisco's core routing and switching business.
For the quarter ended Oct. 31, H-P, the world's largest maker of personal computers, reported earnings of $2.4 billion, or 99 cents a share, up from $2.1 billion, or 84 cents a share, a year earlier. Excluding charges related primarily to restructuring and acquisitions, earnings rose to $1.14 a share from $1.03.
Revenue decreased 8.4%, to $30.8 billion.
The company's preliminary results earlier this month were for earnings of 99 cents, including 15 cents of charges, on revenue of $30.8 billion.
H-P's operating margin grew to 10.2% from 8.2%.
Revenue decreased 3% in the Americas, and dropped 17% in the Europe, Middle East and Africa region and 1% in Asia Pacific. Revenue from outside the U.S. accounted for 64% of the total.
The core personal-computer business posted a profit decline of 25%, while the segment's unit shipments were up 8%. Notebook-computer revenue fell 8%, while desktop-computer revenue declined 16%. Earnings in the services segment improved 53%. Earnings at H-P's printer unit, which has concerned some analysts as consumers and businesses scale back, rose 1.4%. The company's software earnings increased 11%.
Shares fell about 0.7%, to $50.72 in after-hours trading. The stock is up about 40% this year.
- By John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com
(Ben Charny contributed to this article.)